THE former Japanese finance minister known as “Mr Yen” has urged the Government to suspend intervention in the currency markets.

It emerged yesterday that Japan’s Ministry of Finance spent 7 trillion yen (£35 billion) in an attempt to support the US dollar over January.

In an exclusive interview with The Times, Eisuke Sakakibara, the former Finance Minister for International Affairs, said that he was surprised by recent currency intervention by Japanese authorities.

The man famed for his ability to move markets in the 1990s said that there were more effective ways for the state to direct its money.

Mr Sakakibara, now a professor at Tokyo’s Keio University, said that the Y7 trillion of dollar-buying by his former ministry was “unusually high” but that its effects were weakening with every day that passed. January’s intervention failed to raise the dollar significantly above the Y106 level.

Mr Sakakibara believes that a more efficient way to weaken the yen would be to let the greenback slide until it hit the point where natural buyers, mainly Japanese importers, started supporting it. At the moment that the dollar-buying achieved a decent momentum, the Bank of Japan should step in with big orders of its own, he said.

“It is quite well understood in the market that if the rate were allowed to fall to 100 there are plenty of institutions and companies ready to buy,” he explained.

Many investors believe that, despite his outspoken criticism of the Prime Minister, Junichiro Koizumi, Mr Sakakibara remains in close and influential touch with the Finance Ministry. “Of course I talk to my former colleagues quite frequently,” he said. Traders also believe that Japan’s Finance Minister recently called senior executives from Japan’s “big four” banks to ask them the effect of temporarily stopping the intervention flow.

Toru Uemoto, senior currency analyst at Morgan Stanley, said: “Sakakibara’s advice is very reasonable. The interventions efforts are having a limited effect, and such levels of dollar-buying are not sustainable. Letting the dollar fall to 100 is good tactics.”

Mr Sakakibara’s advice comes as currency trading floors have descended into confusion over what this weekend’s G7 meeting will bring. Before the last meeting, in a move that took markets by surprise, Japan allowed the dollar a few days of freefall and hedge funds are reportedly preparing for the same again.